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House prices are likely to continue rising for at least another ten years, George Osborne suggested yesterday when he attacked “Nimbys” for slowing down planning reforms – reported on the front page of The Times by Sam Coates, Philip Aldrick and Francis Elliott. The Chancellor told peers that the shortage of housing was an historic problem as he stressed that the coalition was trying to boost supply as well as providing cheaper home loans to struggling families. “I imagine if we were to assemble again in ten years’ time, we would still be talking about the challenge of making sure that our housing supply keeps up with demand,” he told the House of Lords Economics Affairs Committee. Mr Osborne defended the Help to Buy policy in the face of criticism from Liberal Democrats such as Vince Cable, who suggested last week reducing the maximum home purchase of £600,000.

Personal Finance

While The Sun’s leader is dedicated to energy prices, the Daily Mail looks at miss-selling of superfluous insurance against credit card fraud along with a brief history of miss-selling scandals – from pensions mis-selling scandal, endowment mortgages, and Payment Protection Insurance to interest-rate swap loans and packaged bank accounts. Some 7 million customers of banks such as Barclays, Santander and RBS have been conned into paying up to £1.3billion for policies they don’t need – Lloyds is now implicated as well. The Mail says “though the products mis-sold may have varied, one mystery endures. Why, after this long history of deception and grand larceny, has not a single senior banker been hauled before the courts?…. This fraud won’t cease until the guilty are behind bars.”

Property

Prince Charles has waded into the battle for residents of Somerset according to the front page of The Times, The Guardian and the Daily Mail. The Mirror and the Daily Telegraph are unlikely bedfellows but not only do they also put Charles’ criticism of the official response to the crisis on the front page – they also run editorials on it. Although it was not overtly political, the Daily Telegraph compared the Prince’s visit (he was greeted warmly) to that of Owen Paterson, the Environment Secretary, who was met with placards and jeers. The Telegraph says the visit “reminded us in what low regard quangocrats – such as the mysteriously absent Chris Smith, who runs the Environment Agency – are held.” The Mirror’s Leader piece, on the other hand says the Prince of Wales criticising the disastrously slow response… “is a royal seal of disapproval on David Cameron’s Government”.

Recruitment

The Daily Express says “Britain’s overstretched public services are nearing breaking point” blaming immigration. “One in four babies born in this country have a mother who comes from outside the UK, while Afghan and Somali women are having four or more children, more than twice the national average. They will… need medical care before, during and after the birth… and that’s before the needs of schooling and housing even enter the equation…. This simply has got to stop. The Prime Minister has talked grandiosely about bringing net migration figures into the tens of thousands (and even that would be too much in this overcrowded little isle) and yet it has been revealed that net migration from the EU rose to 106,000 in the year ending June 2013, up from 72,000 the previous year. And that was before immigration controls on people arriving from Eastern Europe were lifted in January. Labour’s stance on immigration was one of the wickedest policies it pursued in its 13 years of office, a course of action foisted on the electorate for utterly cynical reasons which has changed the face of this country for ever.” The Express concludes, “Mr Cameron must act to stem further damage. And fast.”

Optimism about Britain’s economic prospects took a knock after unexpectedly weak official data from the manufacturing and construction sectors was released on Friday. ONS figures said that manufacturing output stagnated between October and November and construction output fell. The news prompted a slight downward adjustment in growth forecasts and took economists by surprise, given that the figures did not tally with unofficial business surveys pointing to swelling output, orders and confidence among manufacturing and construction companies. (FT, p.3) Although public and private housing construction have increased by 10 per cent and 13.8 per cent respectively in the first 11 months of 2013, in November there was also a 3.2 per cent fall in private new housing compared to the previous month. Duncan Kreeger, director at West One Loans said: “Gentle progress is encouraging for the property industry. But it won’t be fast enough to solve the crisis facing families in search of affordable homes, or businesses looking for the right location.” (Independent online)

Personal Finance

More than three million middle-aged and retired people have given up saving for old age, believing that whatever they put aside will be taken away to pay for their care, according to new research from Age UK. The charity argues that the Government’s long-awaited overhaul of the care system, which is currently before Parliament, will fail if large numbers abandon saving for later life, because the system relies on individuals contributing to the cost of their care. The research found that almost three in 10 people aged over 50 believe there is “no point” in saving for their future needs.

Property

David Cameron is accused by the Lib Dems of suppressing a report calling for thousands of new homes to be created in two new cities in southern England, in order to ease the housing shortage. (Telegraph, p.1) The proposed new settlements, which would contain tens of thousands of homes, could be built in Buckinghamshire, Warwickshire or Oxfordshire. The Lib Dems argue that the proposals are being side-lined for fear of a backlash in Tory heartlands ahead of the general election.

The number of people moving up the property ladder in 2013 reached a three-year high in 2013 as rising house prices boosted their equity, according to research by Lloyds Bank. Around 337,500 home owners with a mortgage moved last year, a three per cent increase on 2012 and the highest since 2010. (Express, p.22). Meanwhile, the number of £5m+ ‘superhomes’ being sold in London rose by a quarter last year, according to Savills, suggesting that the top end of the London market has not yet been hurt by higher stamp duty, the threat of mansion taxes, or the introduction of capital gains tax for foreign sellers. (Telegraph, p.16, FT, p.2)

Recruitment

All but the absolute banking elite are expected to be disappointed by this year’s city bonuses, according to the Independent (Jonathan Prynn, p.6). Disappointing results and ongoing restricting in a still recovering industry mean that many will be disappointed when informed of their bonuses ahead of annual results next week. A few so-called superbankers are expected to take home up to £6m, while those beneath them expected to take home the same pay or less as last year. A sizeable minority will end up with a “doughnut” – no bonus at all.

Large families are losing up to £400 a week since the introduction of the Government’s weekly benefit cap, which has affected 31,000 households. Figures from the Department for Work and Pensions show that by November more than 2,600 households had lost more than £150 a week or £7,2000 a year. The Times, page 16. The Daily Mail has taken a different view of this – prior to the cuts 33,000 families had “hit the jackpot” under Britain’s “generous” welfare system. Front page. Also page 5, Daily Express …

Property

Francesca Steele looks ahead to 2014 in the Bricks & Mortar section of The Times. On the government pledge to pump £1 billion into infrastructure to unlock housing projects , Stuart Law CEO at Assetz, comments that this pledge is welcome and a boost to supply, creating homes and jobs, is to be welcomed. Forecasts around property prices are also buoyant with Knight Frank predicting an 8.4% rise in property prices this year. According to Mortgages for Business buy-to-let lending will reach £25 billion by the end of 2014 but investors should watch out for the “hidden” amendment to the CGT final exemption period. The Times, Bricks & Mortar, page 6-7.

Thousands of people have wrongly been identified as liable for bedroom tax, including some who now face eviction or have been forced to move to a smaller property as a result of an error by the Department for Work and Pensions. Housing experts believe that as many as 40,000 people could be affected by the mistake. The Guardian, pg 1.

Economics

Yesterday three of the UK’s biggest retailers (Tesco, Morrisons and M&S) admitted that their profits had been hit by poor Christmas sales. They blamed a squeeze on shoppers’ spending power and unseasonal autumn weather for falling underlying sales and lower than hoped for profit margins. The Guardian, pg 30, and pretty much everywhere else. This also highlights the changing nature of consumer spending habits with more online shopping and shoppers buying from small convenience stores.

Recruitment

Clifford Chance has adopted a radical approach to recruiting graduates in an attempt to break the “Oxbridge recruitment bias”. Staff conducting interviews are no longer given any information about which university the candidate attended, or whether they came from independent or state school. This scheme is currently the only one in the UK. In its first year, the scheme saw candidates come from 41 education institutions. Independent, page 9.

December was the best month for home lending in six years, according to the latest Mortgage Monitor from e.surv, the UK’s largest chartered surveyor.

There were 77,918 loans advanced to homebuyers in December, the highest number since November 2007. It marked a 40% increase in home loans over the past year, a jump of more than 22,000 approvals from 55,501 in December 2012. Compared to November, home loans increased 10% from 70,758. It was the tenth monthly increase in a row and the largest monthly increase in two years.

Despite an increase in total lending, the volume of lending to high LTV borrowers dipped in December. In the final month of 2013 there were 9,038 loans to borrowers with deposits worth 15% or less of the total value of their property, a 5% decrease from 9,493 in November.

However, high LTV lending is still far higher than this time last year. While total lending has increased by 40% over the last 12 months, high LTV lending has increased at an even faster rate, rising by 60% from 5,661 high LTV loans in December 2012. The figures also show there is still a way to go before high LTV lending will come close to pre-recession levels, with four times as many monthly high LTV loans before the recession, suggesting lending to borrowers with smaller deposits could still be ramped up significantly.

Richard Sexton, director of e.surv chartered surveyors, explains: “There is still a long road to travel before the mortgage market is fully recovered from the hangover of the financial crisis. But the recovery is quickening, and the end is beginning to appear on the horizon. High LTV lending has exploded in the past 12 months, and it is now far easier to take out a mortgage with a smaller deposit saved. There has been something of a festive dip in high LTV lending in the last month, likely to be the result of lower equity borrowers paying for Christmas and delaying their move until the New Year. High LTV lending should continue its recovery in the coming months, but it’s important that Help to Buy remains in place to help support borrowers in building a deposit, enabling them to access better rates, and cheaper deals.”

2013 has been something of a tale of two halves, with the recovery in lending stepping into a new gear in the second half of 2013. House purchase lending increased just 6% in H1 2013, going on to increase by 32% in H2 2013. The recovery in high LTV lending was more evenly spread throughout the year. High LTV lending increased 26% in H1 2013, and a further 27% in H2 2013.

Richard Sexton, director of e.surv chartered surveyors, explains: “The mortgage market had a bumpy beginning to 2013, as fears of a triple-dip recession reigned supreme, and banks were cautious about lending. But while the first half of the year witnessed a moderate uptick in lending, with the seeds of the economic recovery beginning to sprout, the second half of 2013 saw the mortgage market grow at an electric rate.”

More first-time buyers

The number of loan approvals on properties up to the value of £125,000 has increased by 34% in the last year, with 15,584 loans on properties valued £125,000 or under in December 2013, compared to 11,655 in December 2012. It reflects a pick-up in the market, and an increase in the number of lower equity borrowers choosing to move-home or buy for the first-time.

The number of first-time buyers in November 2013 was 28% higher than in November 2012, according to the latest LSL First Time Buyer Tracker, as mortgage rates fell to 3.93% – the lowest on record. But there are warning signs ahead. The average first-time buyer purchase price rose 11% over the year to November, to £149,404.

Richard Sexton, director of e.surv chartered surveyors, explains:“More high LTV borrowers and first-time buyers are looking to buy property now than any other time post financial-crisis. But they are having to fork out more than ever, as prices are driven up by the intense competition for property. Traditionally, first-time buyers have turned to their parents for help building the cash for a deposit – a deposit that is growing larger as prices rise. But inflation has eaten away at many parent’s cash reserves, and this well is beginning to dry up. In order to keep the market accessible for everybody, house building must be ramped up, to prevent the challenge of saving for a deposit form becoming even more difficult.”

The number of first-time buyers climbed 28% year-on-year in November thanks in part to the lowering of mortgage rates by lenders, according to the latest First Time Buyer Tracker from LSL Property Services.

Transactions

Average Purchase Price (£)

Average LTV

November 2013

27,800

£149,404

81.3%

October 2013

26,800

£149,375

81.1%

1 month change

+3.7%

+0.0%

+0.2% (from 81.1%)

3 month change

+5.3%

+1.7%

+1.0% (from 80.3%)

1 year change

+28.1%

+11.4%

+2.2% (from 79.1%)

There were 27,800 first-time buyer sales in November, 6,100 more than a year ago, showing improvements in the first-time buyer market are gathering even greater momentum.

The average first-time buyer LTV rose to 81.3%, the highest since September 2011, in a sign of the increased availability of mortgages as banks become more willing to lend to those with smaller deposits. As a result the average deposit size fell to £27,942, a 3.4% fall in the past three months, attracting more aspiring buyers back into the market.

Deposits consequently now represent a smaller proportion of first-time buyer incomes, with the average deposit of a new buyer equalling 76.6% of annual income, a 5.8% fall over the course of the last twelve months.

The increase in first-time buyer activity has also been fuelled by the improved affordability of mortgages. In November the average mortgage rate fell to 3.93%, down 0.8% since last year, with banks having being able to pass cheap credit from Funding for Lending onto borrowers.

But there are warning signs ahead, with rising house prices potentially threatening to price the next wave of first-time buyers out of the market. The average purchase price for a first-time buyer rose by 11.4% year-on-year in November, and now stands at £149,403 – up £15,340 in the last twelve months.

Similarly, although the cheaper rates meant that mortgages were more affordable for first-time buyers, the proportion of income represented by mortgage repayments is starting to creep up as house prices rise. Mortgage repayments have increased 0.1% in the past month and 0.4% over the past three months, despite consistently falling mortgage rates.

First-Time Buyer Affordability

Average deposit (£)

Deposit as proportion of income

Average mortgage rate

Mortgage repayment as proportion of income

November 2013

£27,942

76.6%

3.93%

21.0%

October 2013

£28,243

77.5%

3.94%

20.9%

1 month change

-1.1%

-0.9%

-0.01%

+0.1%

3 month change

-3.4%

-3.6%

-0.02%

+0.4%

1 year change

-0.4%

-5.8%

-0.79%

-0.2%

David Newnes, director of LSL Property Services, owners of estate agents Your Move and Reeds Rains, said: “There has been a revival in the first-time buyer market over the past twelve months, with sales increasing by nearly a third. Mortgages are much more affordable, which has opened the door to welcome in thousands of aspiring homeowners who had previously been locked out of the market. A boost in economic confidence has attracted more buyers back to bricks and mortar, while banks have equally been far more prepared to lend to those with smaller deposit sizes.

“Rates have fallen, and there is now an array of attractive deals on offer for shrewd first-time buyers, which has made mortgages far easier to secure. The spark has been government schemes like Funding for Lending and the equity loan first phase of the Help to Buy scheme. Although Funding for Lending has been cut back, the mortgage guarantee scheme, second phase of Help to Buy introduced in October, will really kick into gear in the next few months. It will be this that will carry the torch through into 2014.”

“However there is a flipside to the coin. Prices are rising and there is simply not enough housing stock to match continued demand, meaning this will continue well into 2014. If demand is not satisfied by supply, then sustainable growth will be hampered and future first-time buyers will once again be left out in the cold. We need far more homes, particularly at the lower end of the spectrum if we are to sustain a healthy property market.”

On a regional level, there continues to be disparity across the UK with stark differences throughout the country in property values, deposits required and mortgages taken out for those entering the property market. In the three months to November the South East saw the greatest number of first-time buyers, with 15,600 sales across the region, closely followed by London at 13,400. This is despite the fact that first-time buyer properties in the capital and the South East have required the largest average deposits, at £67,623 and £37,788 respectively.

By comparison, in the North West first-time buyers only require an average deposit of £15,791 with an average purchase price of £112,820. This therefore means that new buyers in these Northern regions only have to take out an average mortgage of £97,508, whereas by comparison those in London have an average mortgage of £208,448.

Wales in particular has experienced uplift in first time buyer activity, largely to a required average deposit of just £11,683 and purchase price of £107,038.

David Newnes, director of LSL Property Services, owners of estate agents Your Move and Reeds Rains, concludes: “Although a flag has been planted in the nationwide recovery, up and down the country we are seeing contrasting fortunes for first-time buyers eager to enter the property market. Price rises in the capital and South East are surging ahead of those in the rest of the country, and the resulting deposits needed to get onto the ladder are following suit. Buyers in the North are faring better in this respect. They have less of a mountain to climb to reach the summit of the required deposit.

“However, while potential homeowners in Northern region have smaller deposits to accrue, they are – as a whole – less cash-rich than those in the capital and the surrounding areas, which therefore necessitates them taking out higher LTV mortgages. With many anticipating a rise in interest rates next year, many new homeowners across the country will feel a greater pressure on their finances – especially with repayments as a proportion of income starting to creep up.

“It is startlingly evident that while the UK-wide latest phase of the Help to Buy scheme is having a positive effect, a more tailored and less of a ‘catch all’ approach is needed. One that meets the varying needs of aspiring buyers across the regions. This will be crucial in alleviating the regional disparity and preventing the wall of obstacles that first time buyers have to scale from mounting further.”

There’s a neat summary of house price forecasts for 2014 from Hilary Osborne in The Guardian. The bulls: Rightmove and RICS (8 per cent). The bears: “the normally downbeat” Capital Economics (5 per cent). the consensus appears to be about 6.75 per cent. There’s also, an analysis of the accuracy of predictions for 2013. The booby prizes went to Knight Frank (who forecast a fall of 2 per cent and reported an increase of 7 per cent) and arch pessimists Capital Economics, who forecast Nationwide’s index would fall 5 per cent – the Nationwide HPI rose 6.5 per cent over the year. Closest call was RICS who forecast a rise of 2 per cent then reported a rise of 5 per cent.

A Capital Economics forecaster

Personal Finance

In an editorial piece in the Daily Express (beneath an expression of gratitude to our troops and above a rather toadying message to the Queen – “here’s to the next royal baby, Ma’am!) the paper highlights the importance of pensions (sparked by a report on a potential pensions disaster for the next generation). The Express says, “If half the population aren’t paying enough towards their pensions or are leaving it too late to join then there is a time bomb ticking that will cause immense hardship and worry. If youngsters won’t listen to the Government or experts then it is the duty of parents and grandparents to put them wise to one of the best investments anyone can make”

Property

Leader pieces in the Daily Mirror and the Daily Telegraph focus on flooding. In “Joy’s at a premium” the Daily Mirror argues that insurance companies should play fair and pay up promptly. “Instead of quibbling they should help put the lives of those affected back together rather than hindering them. Firms who happily pocket the monthly premiums have a moral duty to write a big cheque when a legitimate claim is made by a policy holder”. The Daily Telegraph, on the other hand, says should consider if we are doing all we can to ward against flooding. Earlier this year, the Coalition announced that it would spend more on flood defences, after cutting back when it came to power. But MPs warned this would still not keep pace with increasing risks: “a renewed focus on this issue will prevent the wreaking of similar devastation on more homes, and more lives, in the years to come.”

Recruitment and Employment

The BBCs reports a survey by the recruitment organisation, Randstad, which shows that while the recession has led to a drop in the number of people commuting as people lost their jobs – there has been an increase in people travelling more three hours a day. The poll, which looked at the commuting patterns of 2,000 workers between 2008 and 2013, found that almost one in 10 respondents were now travelling for that period a day – compared with one in 20 previously.

Property
A new record 400,000 property owners are now property millionaires, that’s translates as twice as many as five years ago according to Zoopla. The number of homes worth £1 million or more has increased by a third over the past twelve months, thanks to soaring house prices in London and South East. The lack of supply of new homes in the capital was to a great extent responsible for driving forward a further 57,120 over the £1 million mark which equates to 156 new property millionaires a day in the capital throughout 2013, as shown by Zoopla. Prices are still rising according to the latest ONS figures, by 5.5% in the past 12 months, and the rise is even higher in London, jumping by 12%. Marsh & Parsons highlighted that prices are at more than double the rate of other areas , while Prime London continues to be a honeypot for UK and overseas buyers, as demand remains intense. As a result, LSL highlights that first time buyers are still having to leap higher than ever before to join the property ladder.

Personal Finance
Over half of UK shoppers are heading to discount shops, visiting an Aldi or Lidl figures revealed, for the first time ever. More than 13 million used the budget stores in the past three month, up from 46.1% a year ago. As a result all of the big four grocers have lost market share, as the so-called budget shops now make up a combined seven per cent of the total market. Credit crunch bargains are proving attractive across the country, as value continues to be a great incentive. Although Lidl and Aldi may not be as prevalent in London, more common in regions where shoppers can drive to do a food shop, this is likely to change, as more shops are expected to open next year. The type of customers are also said to be changing – those known as ABC1s (the traditional middle classes) make up just 25% of shoppers in 2011. Last year that rose to 41%, proving that Aldi is no longer the store of the cash strapped student.

Economy
Britons believe that securing growth as their top economic priority is more significant than higher wages according to a survey for the Independent. The ComRes survey findings suggest that the Conservatives message on the economy may resonate more than Labour’s campaign on reducing the cost of living. Their competing messages will lead to a fierce battle in the run up to the 2015 election. It’s interesting to note that in a list of important priorities over the next five years from a range of options, at the top was ensuring the economy continues to grow, followed by ensuring wages increase faster than prices, thirdly keeping inflation down and finally reducing the deficit. Now that the economy is growing the Tories will take comfort in the fact that that the findings show people view growth as the top factor.

Recruitment
More than half of the UK is said to be ripe for fracking according to a new Government report by engineering giant Amec, that shows a shale gas boom could create up to 32,000 new jobs. These plans have been met with mixed responses with some arguing it will cast a dark shadow over many communities in Britain who could now face the threat of fracking in their backyard. A new licensing round to enable firms to search for shale gas will begin in the summer. There could be between 14 and 51 vehicle movements to a fracking site each day over a 32 to 145-week period which could have a serious impact on traffic congestion, noise or air quality, depending on existing roads, traffic and air quality.